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Category > Economics Posted 06 Sep 2017 My Price 8.00

Assume the banking system contains the following amounts

Assume the banking system contains the following amounts:

 

Total reserves   $90 billion
Transactions deposits   $900 billion
Cash held by public   $100 billion
Reserve requirement    0.10


(a) Are the banks fully utilizing their lending capacity?

Yes
No

 

(b) What would happen to the money supply initially if the public deposited another $20 billion of cash in transactions accounts?

 

Decrease by $30 billion
No change
Increase by $30 billion
Not enough informatiion

 

Instructions: Enter your responses as a whole number.

 

(c) What would the lending capacity of the banking system be after such a portfolio switch?

 

$ billion

 

(d) How large would the money supply be if the banks fully utilized their lending capacity?

 

$ billion

 

(e) What three steps could the Fed take to offset that potential growth in M1?

 

Raise the reserve requirement, raise the discount rate, and use open market sales.
Lower the reserve requirement, raise the reserve requirement, and use open market sales.
Raise the reserve requirement, raise the discount rate, and use open market purchases.
Lower the reserve requirement, raise the discount rate, and use open market sales.

 

Answers

SophiaPretty
(5)
Status NEW Posted 06 Sep 2017 01:09 PM My Price 8.00

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